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Spread trading is considered one of the secure ways of investment. It suggests risk reduction opening two equal and directly opposite positions. Spread trading strategy can be applied and is advantageous for both novice traders and experienced ones as it is featured by less volatility, higher margins and smoother trends.
Spread Trading represents the simultaneous buying and selling of two related securities/contracts based on the expectation that their relative prices will converge. One can trade E-mini S&P with E-mini Dow – both are Stock indices and, henceforth, are correlated, as well as such pairs as Corn and Soy, Gold and Oil. Each position in the spread is called a leg. While trading the related assets one trades the difference or spread price between the two legs, simultaneously going long on one leg and short on the other.
Spread Trading as we have already mentioned, helps to reduce market volatility and balances the relation between risks and profit. In order to identify the traded contracts, one has to create a chart and analyze it accordingly, and here is where GeWorko Method comes into play. It grants a unique opportunity for spread traders to effectively develop spread trading strategies, by constricting corresponding charts quickly and easily and use extensive arsenal of technical analysis tools.
It is the dream of every trader to find a strategy, producing consistent profits by escaping great drawdowns, and spread trading may just come close to fulfilling it. Spread trading, that evolved together with market creation and traditionally has been applied to futures, is considered a powerful trading strategy.